Delayed ESI/PF contributions allowed as deduction under section 143(1) following Checkmate Services precedent

ITAT Raipur allowed the appeal regarding delayed deposit of employees' share of ESI/PF contributions. The tribunal held that prior to the SC judgment in Checkmate Services Pvt. Ltd., such deductions could not be summarily disallowed under section 143(1). Following precedent from Gurmeet Singh Hora, the tribunal set aside the CIT(Appeals) order that upheld the CPC's disallowance under section 154, vacating the addition made by the AO and allowing the deduction claim.

---

---

Issues Involved:
1. Legitimacy of the addition of Rs. 24,72,236/- under Section 36(1)(va) of the Income Tax Act.
2. Validity of the disallowance of the deduction for delayed deposit of employees' share of contribution towards ESI/PF by CPC, Bengaluru under Section 143(1) of the Act.
3. Applicability of judicial precedents and the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT-1.

Summary:
Issue 1: Legitimacy of the addition of Rs. 24,72,236/- under Section 36(1)(va) of the Income Tax Act
The assessee company filed its return for A.Y. 2018-19 declaring an income of Rs. 84,31,610/-. The Centralized Processing Center (CPC), Bengaluru, disallowed the deduction of Rs. 24,72,236/- for delayed deposit of employees' share of contribution towards ESI/PF under Section 36(1)(va) via intimation issued under Section 143(1) of the Act. The assessee's subsequent application under Section 154 was also rejected by the CPC.

Issue 2: Validity of the disallowance of the deduction for delayed deposit of employees' share of contribution towards ESI/PF by CPC, Bengaluru under Section 143(1) of the Act
The CIT(Appeals) upheld the CPC's decision, citing that the Employees Provident Fund Act, 1952 mandates contributions to be remitted within 15 days from the close of the month in which employees earned their salary. The CIT(A) referenced the Supreme Court's decisions in Checkmate Services (P.) Ltd. v. CIT and Principal Commissioner of Income-tax Vs Strides Arcolab Ltd, which clarified that the provisions of Section 43B do not apply to the determination of the "due date" under Section 36(1)(va).

Issue 3: Applicability of judicial precedents and the Supreme Court's decision in Checkmate Services Pvt. Ltd. vs. CIT-1
The Tribunal noted that prior to the Supreme Court's judgment in Checkmate Services Pvt. Ltd. vs. CIT-1, the issue of whether delayed deposits of employees' share of contributions towards ESI/PF could be disallowed under Section 143(1) was debatable. The Tribunal referenced its previous decisions, including Gurmeet Singh Hora Vs. ACIT and Satpal Singh Sandhu Vs. DCIT, which concluded that such disallowances could not be summarily made under Section 143(1) before the Supreme Court's ruling.

Conclusion:
The Tribunal set aside the CIT(A)'s order and vacated the addition of Rs. 24,72,236/- made by the CPC/A.O under Section 154 of the Act. The appeal of the assessee company was allowed, emphasizing that prior to the Supreme Court's decision in Checkmate Services Pvt. Ltd., the disallowance of delayed deposits of employees' share of contributions towards ESI/PF could not be summarily made under Section 143(1).

Order pronounced in open court on 11th day of January, 2024.

---